Exemplar Problems

1. Naman, Manan and Chaman were partners in a firm sharing profits and losses in the
ratio of 5:3:2. Their balance sheet as on March 31, 2018 was as follows:

Balance sheet of Naman, Manan and Chaman as at March 31, 2018

Particulars Amount ₹ Particulars Amount ₹
Creditors 25,000 Cash at Bank 20,000

Bills Payable 35,000 Debtors 30,000

Bank Loan 1,40,000 Inventory 25,000

General / Reserve 60,000 Furniture 65,000

Capitals Machinery 1,60,000
Naman 40,000 Building 2,00,000
Manan 80,000
Chaman 1,20,000 2,40,000
5,00,000 5,00,000
Manan retired on the date of Balance sheet and the following adjustment was made:

i. Inventory was valued at 10% less than the book value.

ii. Furniture was found overvalued by 30%.
iii. Madinary to be depreciated by 10%.
iv. Building to be appreciated by 25%.
v. Reserve for legal charges to be made at2,500.
vi. The goodwill of the firm be fixed at 30,000.
vii. The Capital of the new firm be fixed at 90,000. The continuing partners decide sharing of
3:2 respectively for Naman and Chaman.

Record necessary journal entries and prepare the balance sheet of the reconstituted firm.

2. Avni, Bhumi, Chhavi and Deepika are partners in a firm sharing profits and losses in the
ratio of 10:4:3:3. On March 31, 2018 their Balance sheet was:

Balance sheet as at March 31, 2018

Particulars Amount ₹ Particulars Amount ₹
Creditors 10,000 Cash at Bank 55,000

Reserve Fund 30,000 Trade Receivables 65,000

Profit & Loss A/c 40,000 Inventories 40,000
Capitals Furniture and Fixtures 50,000
Avni- 1,00,000 Building 1,45,000
Bhumi 70,000 Advertisement 15,000
Suspense a/c
Chhavi 80,000
Deepika 40,000 2,90,000
3,70,000 3,70,000

On the above date Chhavi decided to retire from the firm. It was agreed among remaining
partners that:

i. Bhumi will retain her original share in the profits of new firm.
ii. The new profit sharing ratio among Avni and Deepika was agreed at 2:3 respectively.
iii. Chhavi’s account was fully settled by making a lump-sum payment of ₹ 1,05,000.

You are required to pass necessary Journal entries at the time of Chhavi’s retirement and also
find out the new profit sharing ratio among Avni, Bhumi and Deepika.

3. Geet, Geeta and Geetika were partners in a firm sharing profits and losses in ratio of 1/2,
1/6 and 1/3 respectively. Their Balance sheet as on April 1, 2018 was as follows:

Balance Sheet as at April 1, 2018

Liabilities Amount ₹ Assets Amount ₹
Sundry Creditors 30,000 Cash in Hand 20,000
Bills Payables 50,000 Cash at Bank 1,17000
Reserves 70,000 Debtors 70,000
Workmen 30,000 Less- Provision for 63,000
Compensation Bad Debts 7000
Reserve
Provident fund 70,000 Inventory 75,000
Capitals Furniture 1,25,000
Geet – 1,50,000 Machinery 1,50,000
Geeta- 2,00,000 Freehold Premises 2,80,000
Geetika- 3,00,000 6,50,000 Goodwill 70,000
9,00,000 9,00,000

Geeta retires from the business and the partner agrees to the following:

a) Freehold premises and inventory are to be appreciated by 20% and 15% respectively.
b) Machinery and Furniture are to be depreciated by 12% and 7% respectively.
c) Debtors amounting to 6,000 were to be written off as bad.
d) Provision for Bad Debts is to be increased to 10,000.
e) Goodwill of the firm is valued at 60,000 on Geeta’s retirement.
 f) The continuing partners have decided to adjust their capitals in their new profit sharing
ratio after retirement of Geeta. Surplus/ eleficit, if any, in their capital accounts will be
adjust through current accounts.

Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

4. Ramesh, Suresh and Mahesh are partners sharing profit in the ratio of 5:3:2. Their
Balance sheet as on March 31, 2018 are as under:

Balance sheet of Ramesh, Suresh and Mahesh as at March 31, 2018

Liabilities Amount ₹ Assets Amount ₹
Sundry Creditors 80,000 Cash 4,000
Bills Payables 18,000 Bank 12,000
Reserves 30,000 Debtors 30,000
Capitals Bills Receivable 8,000
Ramesh – 1,60,000 Stock 84,000
Suresh- 1,25,000 Machinery 1,70,000
Mahesh- 1,50,000 4,35,000 Building 2,44,000
Employees Provident 7,000 Patents 18,000
fund
5,70,000 5,70,000

Suresh decided to retire from the firm on that date and it was decided that Ramesh and Mahesh
would share the future profits in the ratio of 7:3 Goodwill was valued at 1,00,000; Machinery
was Found over valued by 14,000; Building is valued at 3,00,000; stock at 75,000; and Bad debts
amounting to 3,000 were to be written off.

Record Journal entries in the books of the firm and prepare the Balance sheet of the new firm.

5. Narenedra, Suresh and Rajesh were partners in a firm sharing profits in the ratio of 4:3:2.
On Ist April, 2018. Their Balance sheet was as follows-

Liabilities Amount ₹ Assets Amount ₹

Sundry Creditors 82,800 Cash at Bank 66,000
Capital a/c Sunday Debtors 60,900
Narendra 2,40,000 Less Provision for 58,800
2100 Doubtful debt
Suresh 1,80,000 Stock 96,000
Rajesh 1,20,000 5,40,000 Machinery 1,02,000
Land and building 3,00,000
62,2800 62,2800

Suresh had been suffering from ill-health and gave notice of retirement from the firm. An
agreement was therefore entered into as an Ist April, 2018, the term of which were as follows:-
 i. That land and building be appreciated by 10%.
ii. The provision for doubtful debt is no longer necessary.
iii. Stock to be appreciated by 20%.
iv. That Goodwill of the firm be fixed at ₹ 1,08,000. Suresh’s share of the same be adjusted
into Narendra’s and Rajesh’s capital Accounts, who are going to share future profits in
the ratio 2:1.
v. The entire capital of the newly constituted firm be readjusted by bringing in or paying
necessary cash so that the future capital of Narendra and Rajesh will be in their profit-
sharing ratio.
Prepare revaluation account and Partners Capital Account.

6. Vikas, Vishal and Vinay are partners sharing profits in the ratio of 2:2:1. Vishal retire
from the firm. On that date the Balance sheet of the firm was as follows.

Balance sheet of Vikas, Vishal and Vinay as at March 31, 2018

Liabilities Amount ₹ Assets Amount ₹
General Reserve 24,000 Cash in Hand 4,000
Sunday Creditors 30,000 Cash at Bank 9,800
Bills Payable 24,000 Debtors 12,000
Outstanding Salary 3,000 Less
Provision for (800) 11,200
Doubtful
debts
Provision for legal 12,000 Stock 18,000
damages
Capitals: Furniture 82,000
Vikas 92,000 Premises 1,60,000
Vishal 60,000
Vinay 40,000
2,85,000 2,85,000

Additional Information:-

i. Premises have appreciated by 20%, stock depreciated by 10% and provision for
doubtful debts was to be made 5% on debto ₹
ii. Further provision for legal damages is to be made for ₹ 2,000 and Furniture to be
brought up to ₹ 90,000.
iii. Goodwill of the Firm be valued at ₹ 90,000.
iv. ₹ 48,000 from Vishal’s Capital account be transferred to his loan account and
balance to be paid through bank, if required, necessary loan may be obtain from
Bank.
 v. New profit sharing ratio of Vikas and Vinay is decided to be 5%.

Give the necessary ledger accounts and balance sheet of the firm after Vishal’s retirement.

7. Amit, Bholu and Deepu were partners in a firm sharing profits and losses in the ratio of
5:3:2 on March 31, 2018, their Balance sheet was as under:

Balance sheet as at March 31, 2018

Liabilities Amount ₹ Assets Amount ₹
Creditors 55,000 Cash in hand 40,000
Bills Payables 45,000 Cash at Bank 1,10,000
General Reserves 20,000 Debtors 70,000
Capitals Bills Receivable 60,000
Amit – 2,50,000 Inventory 70,000
Bholu- 1,50,000 Machinery 1,50,000
Deepu- 90,000 4,90,000 Land & Building 1,20,000
Goodwill 30,000
6,50,000 6,50,000

Bhanu died on August 24, 2018. It was agreed between his executors and the remaining partners
that:

a) Goodwill to be valued at 2 years purchase of the average profit of the previous four years
which were:
Years ₹
2014-15 40,000
2015-16 75,000
2016-17 1,25,000
2017-18 1,60,000
b) Machinery be valued at ₹ 1,30,000 and Building at ₹ 1,50,000.
c) Profits for the year 2018-19 be taken as having accrued at the same rate as that of the
previous year.
d) Interest on capital be provided at 10% per annum.
e) Provision for bad debts to be maintained @ 15% on debto ₹
f) Half of the amount due to Bhanu is paid immediately to his executor.

Prepare Revaluation Account, Bhanu’s Capital Account and Bhanu’s executors account as on
August 24, 2018.
 8. Bhusan, Dheeraj and Shailendra were partners in a business sharing profits and losses in
the ration of 3:2:1 respectively. Their balance sheet as on March 31, 2018 was as under:

Balance sheet as at March 31, 2018

Liabilities Amount Assets Amount ₹
₹
Sundry Creditors 60,000 Cash at Bank 1,50,000
Bills Payables 45,000 Debtors 60,000
Outstanding Salary 45,000 Less-
Provision for Doubtful
Debts 10,000 50,000
Provision for legal 40,000
Damages Inventory 80,000
General Reserve 60,000 Furniture 70,000
Capitals: Investment 1,50,000
Bhushan- 2,00,000 Building 2,10,000
Dheeraj- 2,00,000 Patents 40,000
Shailender- 1,00,000 5,00,000
7,50,000 7,50,000

Shailendra died on July31, 2018. It was agreed among his executors and the remaining partners
that:

a) Patents were considered as valueless.

b) Building have appreciated by 20%, inventory depreciated by 15% and provision for
doubtful debts was to be made 5% on debto ₹
c) Bad debts amounting to ₹ 8,000 were to be written off.
d) Provision for legal damages is to be brought up to ₹ 50,400.
e) The deceased partner will be entitled to his share of profit up to the date of death
calculated on the basis of previous year’s profits.
f) Deceased partner’s share of goodwill of the firm will be calculated on the basis of twice
the average profits of last four yea ₹ The profits for the last four financial years are given
below:
For 2014-15- ₹ 40,000; for 2015-16- ₹ 80,000;
For 2016-17- ₹ 1,20,000 and for 2017-18 ₹ 1,80,000.
g) The drawing of the deceased partner up to the date of death amounted to ₹ 10,000 and
interest on drawing is to be charged @ 12% per annum.

Remaining partners agreed that ₹ 31,300 should be paid to the executors immediately and the
balance in four equal yearly installments with interest @ 12% p. a. on outstanding balance.

Prepare Shailendra,s capital account and his executor’s account till the settlement of the amount
due.
 9. Jai, Vijay, Vishu and Veeru were partners in a firm sharing profits and losses in the ration
of 3:4:2:1 respectively. Their Balance sheet as at March 31, 2018 was as under- Books of
Jai, Vijay, Vishu, Veeru

Balance sheet as at March 31, 2018

Liabilities Amount ₹ Assets Amount ₹
Sundry Creditors 1,10,000 Cash at Bank 1,40,000
Outstanding Expenses 40,000 Sunday Debtors 1,80,000
Reserve Fund 1,00,000 Less- Provision for 1,60,000
Doubtful Debts 20,000
Capitals: Inventory 1,50,000
Jai- 2,00,000 Furniture & Fixtures 2,00,000
Vijay- 2,00,000 Land and Building 3,60,000
Vishu- 3,00,000 Goodwill 90,000
Veeru- 3,00,000 10,00,000 Patents 1,50,000
12,50,000 12,50,000

Veeru died on 31st December, 2018. It was agreed among his executors and the remaining
partners that:

a) Debtors amounting to ₹ 30,000 were to be written off as bad debts.

b) Provision for doubtful debts was to be made @ 8% on debto ₹
c) Outstanding expenses are now estimated at ₹ 48,000.
d) Depreciate furniture and fixtures by 10% and appreciate land and building by 20%.
e) Patents is to be valued at ₹ 1,10,000.
f) Goodwill of the firm will be calculated on the basis of total profits of last two yea ₹
g) Veeru’s shares in the profits of the firm fill the date of his death will be calculated on the
basis of average profits of last three completed yea ₹
h) The profits for the last three financial years are given below:
2015-16- ₹ 90,000; 2016-17- ₹ 1,10,000 and
₹ 2017-18 - ₹ 1, 60,000. Prepare Veeru’s Capital Account to be rendered to his
executo ₹ Show your working clearly.

10. Sudhir, Rohit and Sunil are Partners sharing profits in the ration 4:3:2 respectively. Their
Balance sheet as at 31st March, 2018 as follows:

Liabilities Amount ₹ Assets Amount ₹

Capital Cash 5,000
Sudhir 7,00,000 Bank 65,000
Rachit 4,00,000 Stock 3,00,000
Sunil 2,00,000 13,00,000 Debtors 5,00,000
 Land 7,00,000
Creditors 1,65,000
Workmen’s 80,000
Compensation
Reserve
Provision for 25,000
Doubtful Debts
15,70,000 15,70,000

Rachit died on 12 June, 2018 and it was agreed that Sudhir and Sunil will share future profits
in the ratio of 5:4. It was agreed between his executors and the remaining partners that.

a) Goodwill is to be valued at 3 years purchase of average profits of last four yea ₹

Year 2013-14 – ₹ 2,20,000
Year 2014-15 – ₹ 2,20,000
Year 2015-16 – ₹ 2,80,000
Year 2016-17 – ₹3,80,000

b) Land be valued at ₹ 8,00,000 and

Stock valued at ₹ 2,81,000.
c) Rachit’s share of profit till the date of death will be calculated on the basis average profits
of last four yea ₹
d) Provision for Doubtful debts is to be made at 5% of Debto ₹
e) Claim of Workmen Compensation was estimated at ₹ 20,000.

Prepare Rachit’s Capital account to be presented to his executo ₹

11. Virat, Anushka and Meet were partners in a firm sharing profits and losses in the ration
of 4:3:2 on March 31, 2018 their balance sheet was as under:

Books Balance sheet of Virat, Anushka and Meet as at March 31, 2018
Liabilities Amount ₹ Assets Amount ₹
Creditors 30,000 Cash at Bank 20,000
Bills Payable 15,000 Debtors 55,000
Outstanding Expenses 40,000 Bills Receivable 50,000

Workmen 1,20,000 Inventory 75,000

compensation fund
General Reserve 80,000 Machinery 2,50,000
Capitals: Land & Buildings 3,50,000
Virat 2,00,000 Patents 85,000
Anushka 2,50,000
Meet 1,50,000 6,00,000
8,85,000 8,85,000
Meet died on November 05, 2018. According to partnership died, his legal representatives are
entitled to:

i. Balance in capital account.

ii. Interest on capital account @ 12% per annum.
iii. Share in profits up to the date of death on the basis of average profits for the path 4 yea ₹
iv. Share of good will valued on the basis of thrice the average of the past 4 years profits.
v. Land and Building to be appreciated by 15%.
vi. Inventory and Machinery are to be depreciated by 10% and 5% respectively.
vii. Profits for the year ending on March 31 of 2015, 2016, 2017 and 2018 respectively were
₹ 30,000, ₹ 50,000, ₹ 75,000 and ₹ 1,45,000.

Meet’s legal representatives were to be paid the amount due. Virat and Anushka continue of as
partners by taking over Meet’s share in 1:3. Prepare Revaluation Account and Meet’s capital
account to ascertain the amount payable to Meet’s legal representative.